Economists Take Red Pens To A Strong Claim On Severance Tax

Aug 5, 2015

In this June 25, 2012 file photo, a crew works on a gas drilling rig at a well site for shale based natural gas in Zelienople, Pa.
Credit AP Photo/Keith Srakocic, File

Economists are questioning a top Senate Republican’s claims that a new tax proposed by Democratic Gov. Tom Wolf would devastate the natural gas drilling industry.

On WITF’s Smart Talk, Senate President Pro Tem Joe Scarnati responded to a comment about polls showing the majority of Pennsylvanians support a severance tax on natural gas drillers.

“They favor the severance tax and it depends on how you read the poll,” said Scarnati. “If you want to put 250,000 people out of work, ask the poll in that question. How’s that going to fare in polling?”

“You’re saying that a severance tax would put 250,000 people out of work?” asked Smart Talk host Scott LaMar.

“If you’re going to take the plan that this governor has proposed, you will put people out of work,” said Scarnati. “Unquestionable. You will put people out of work.”

The natural gas drilling industry does not employ 250,000 people.

That figure relies on an outdated state estimate of jobs provided directly and indirectly by the natural gas industry. As StateImpact Pennsylvania has reported, the state revised the tally this year. The new jobs figure is about 89,000.

Economists say it’s not clear how a 5 percent severance tax on natural gas drillers would affect employment.

“Some job loss? Yeah, that’s probably true,” said Tim Kelsey, a Penn State University economics professor.

But Kelsey added that Pennsylvania has an edge on other states trying to attract the industry.

“There’s a major transportation cost benefit compared to bringing gas in from the Gulf,” he said. “There are advantages here that would not change if a severance tax were levied.”

“I’m not really a fan of Tom Wolf,” said Matt Rousu, an economics professor at Susquehanna University. “But I don’t think he would try to put in a tax so high to wipe out the industry.”

“There’s no evidence that it’s good,” he said, “but I’ve seen no evidence to suggest that it would lead to a large reduction in fracking.”